US Stock Market Loses 6,000 Trillion Won in One Day... Trump Says "Will Prepare Substantial Relief Measures"

[Image source=EPA Yonhap News]

[Asia Economy New York=Correspondents Baek Jong-min and Lee Hyun-woo] The domino effects of the novel coronavirus disease (COVID-19) and the oil price crash have struck the U.S. stock market hard. Market capitalization worth 6000 trillion won has evaporated. As the U.S. financial market plunges into turmoil, the U.S. central bank and government are struggling to devise countermeasures.

According to local U.S. media on the 9th (local time), the New York Stock Exchange saw 3,500 stocks hit their lowest prices of the year, the most since the 2008 financial crisis. CNBC reported that the market capitalization lost from the three major indices?Dow Jones, S&P 500, and Nasdaq?amounted to $5 trillion (approximately 5986 trillion won) on that day.

The Dow Jones Industrial Average plunged 7.79% (2013.76 points) from the previous trading day to 23,851.02, the S&P 500 index fell 7.60% (225.81 points) to 2746.56, and the Nasdaq index closed down 7.29% (624.94 points) at 7950.68. The combined negative impact of COVID-19 concerns and the oil price crash led to the activation of circuit breakers to halt trading shortly after the market opened, marking the first time in 23 years since 1997 that such measures were triggered to stabilize the market.

The sectors most affected by the decline were energy, which took a direct hit from the oil price drop, and banking stocks, which raised concerns over potential loan defaults related to the energy sector. Donald Selkin, Chief Marketing Strategist at Newbridge Securities in New York, said, "When oil prices fall, the stock prices of connected oil companies plummet, causing a chain collapse of the oil industry and shale producers. Banks, already facing historically low interest rates, will also become vulnerable as defaults spread," expressing concern. He added, "These chain reaction worries drove the stock market crash."

Global IT companies' stock prices also fell sharply amid growing concerns over a worldwide economic slowdown and reduced consumer spending. The combined market capitalization of the five major global IT companies?Apple, Microsoft (MS), Facebook, Amazon, and Alphabet?dropped by $320 billion. On that day, Apple’s stock fell 7.9%, Microsoft 6.78%, Facebook 6.4%, Amazon 5.3%, and Alphabet 6.17%. Tesla, which had recently shown strong gains, plunged 13.57%.

The stock market crash is increasing uncertainty and gradually threatening the real economy. According to a survey by the economic media Quartz, experts responded that there is a 36% chance of a U.S. economic recession this year, doubling from 18% in a similar survey conducted in January. International credit rating agency Moody’s also estimated the probability of a U.S. recession this year to be between 33% and 49%. The UK economic analysis firm Oxford Economics lowered its global economic growth forecast for this year from 2.5% to 2.0%, predicting that if West Texas Intermediate (WTI) crude oil remains around $30 per barrel, the U.S. annual economic growth rate will decline by 0.2 percentage points.

The U.S. central bank and government are preparing to take action. The Federal Reserve (Fed) last week made a surprise cut to the benchmark interest rate to 1.0?1.25%, but views that further rate cuts are inevitable are spreading. The market is rapidly considering the possibility of a zero (0) interest rate cut this month. The Chicago Mercantile Exchange’s FedWatch tool reflected a 39% chance that the Fed will lower the benchmark rate to 0.0?0.25% this month. The zero interest rate possibility, which was 0% on the previous trading day, surged instantly, indicating a negative perception of the current financial market situation. Although the Fed announced it would increase liquidity supply in the short-term funding market, the consensus is that this alone will not calm the market. Graham Taylor, Investment Strategist at Lavo Bank, argued, "Demand has sharply contracted due to COVID-19, and inflation is minimal. Additional easing policies are necessary to overcome this situation."

President Donald Trump also hinted at preparing extraordinary measures to counter economic deterioration during a COVID-19 task force press conference held at the White House that afternoon. He said, "We plan to discuss very substantial relief measures such as payroll tax cuts (with Congress)," adding, "That will be a very large number." The Washington Post (WP) also reported that White House officials will present policy alternatives such as paid leave and small business support to President Trump to respond to the economic impact of COVID-19.

President Trump is scheduled to invite financial industry executives on the 11th for a meeting and press conference on measures to address the stock market decline. Thomas Hayes, Chairman of Great Hill Capital, told the Wall Street Journal in an interview, "Today’s market fear is about a global economic slowdown," urging active intervention by the Fed and the U.S. government.

On the same day, Japan’s Nikkei 225 index opened at 19,450.32, down 1.26% from the previous trading day, and was trading down 1.29% as of 11 a.m. China’s Shanghai Composite Index also started the session down 0.83%, narrowing its losses to 0.15% as of 11:55 a.m. Korean time.

This content was produced with the assistance of AI translation services.